Procurement, production, processing

“I’m committed to upholding social standards. There’s no room for compromise.”

MARGARET CHAN

MGB METRO GROUP Buying Hong Kong (China)

One of us:

Name

MARGARET CHAN

Role

Executive Manager of Corporate Social Responsibility

In

Hongkong (China)

since

1995

As Executive Manager of Corporate Social Responsibility, MARGARET CHAN makes sure that suppliers comply with METRO GROUP’s exacting requirements for social standards and quality. When asked what she loves about her job, she says it is the fact that she can actively help her business partners to bring about improvements with her expertise and experience. Manufacturers are not the only ones who benefit from her commitment – Margaret Chan also makes a valuable contribution for METRO GROUP and its customers. She finds the strength and energy she needs in meditation: maintaining balance is her motto.

Ongoing dialogue: Margaret Chan is a regular visitor to suppliers’ operations in order to interact with her business partners.

METRO GROUPProcurement, production, processing

METRO GROUP gears its product ranges towards customers’ wishes across its various retail formats. Our aim is to procure products that offer reliable quality and safety and have sound social and environmental credentials. In the interests of product responsibility, we trace the origins of our products. As well as this, we define verifiable criteria with respect to quality and sustainability. These criteria apply to the nature of the products themselves, their environmental impact and manufacturing conditions. This enables us to take a systematic and transparent approach to monitoring the origins of raw materials, responsible use of resources, respect for the environment and decent working conditions. Our work in this field is based on our group-wide sustainable purchasing policy for all products, which was adopted in 2013. The policy defines basic requirements and brings together guidelines that address specific questions relating to individual product or raw material categories. These include, for example, our purchasing policy for fish and policy for palm oil and packaging. Our specifications draw on widely recognised standards. In addition, we are involved in developing new frameworks for action.

We help our sales lines to implement these requirements and assist the various players throughout the supply chain by championing transferable and extendable approaches and avoiding stand-alone solutions developed by individual companies. That means we accept different standards with comparable criteria as being of equal quality. For instance, we are involved in the Global Food Safety Initiative (GFSI) and the Global Sustainable Seafood Initiative (GSSI), which aim to harmonise food safety standards and international certifications for sustainable fish respectively. We also provide training to help suppliers meet these requirements. In this way, we do not only help to secure a supply of marketable goods. By demanding and monitoring adherence to standards and specific criteria, we also prevent the risks associated with irresponsible practices. At the same time, inspections by independent auditors confirm to customers that we are committed to high-quality products and processes that are socially and environmentally sound. In doing so, we make use of technical solutions such as traceability in the cloud, which allow us to track products from their origins to the customer’s purchase.

Discover our other main spheres of action

Social Responsibility

METRO GROUP assumes social responsibility throughout the supply chain by ensuring that social standards are adhered to. The key labour standards defined by the ILO are a fixed part of METRO GROUP’s conditions of purchase. As one of the founding members of the Business Social Compliance Initiative (BSCI), we have also been involved for years in systematically establishing socially fair working conditions in the manufacturing of our own-brand products. Our approach here is to assist our suppliers or production facilities in setting up a suitable management process. As evidence of fair and socially equitable working conditions, we accept either audits based on the BSCI requirements or equivalent social standard audits.

We also focus on raising awareness about specific aspects of safe working conditions among our partners. For instance, the BSCI requirements also extend to fire protection – such as fire protection precautions and management systems including emergency exits, escape routes, fire extinguishers and fire drills. For example – in addition to our ongoing auditing programmes – METRO GROUP’s import organisation, MGB METRO GROUP Buying Hong Kong, has been conducting fire protection and occupational safety training courses for suppliers in Bangladesh and other risk countries in conjunction with TÜV Rheinland since February 2013. In June 2013, in order to improve the structural safety of textile factories in production countries, we signed the agreement on better fire protection and building safety in Bangladesh’s textile industry. The agreement came about as part of a multi-stakeholder initiative involving corporate representatives, trade unions and non-governmental organisations. By signing the fire protection agreement, we can further extend our commitment to improving working conditions in the supply chain.

All producers in defined risk countries (based on BSCI evaluation) that supply METRO GROUP with clothing, shoes, toys and consumer durables via its import organisation MGB METRO GROUP Buying Hong Kong are audited in accordance with BSCI or equivalent standards. As at 30 September 2014, this was a total of 835 producers. Of these, 58 per cent passed the audit with the score “good”. Producers who do not pass the audit are given 18 months – as of the audit date – to provide proof of improvement. If they fail to do so, they will receive no further orders until they can provide evidence of sustainable improvements in their organisational processes. 12 per cent of suppliers who failed the original audit succeeded in bringing about the required level of improvement in the financial year 2013/14. However, the total share of suppliers passing the audit has fallen, which can be attributed above all to the even stricter requirements placed by the BSCI on the audit process.

Social audits relating to own imports by MGB Hong Kongas of closing date

BSCI-relevant suppliers (active)

Thereof which passed the auditin %

Suppliers which passed the audit

Active suppliers are those for which actual sales are recorded on the reporting date. Suppliers who pass the audit can obtain a certificate from an independent third party showing that they have successfully implemented the BSCI social standard system or an equivalent set of norms.

Topic

Objectives

Status – goal achievement

Measures

Status – measures

1

This covers producers of merchandise (own brands and own imports) that perform the last significant and value-adding production step.

INTER­NATIONAL LABOUR NORMS/SOCIAL­STANDARDS

METRO GROUP is expanding its efforts to ensure its suppliers provide fair working conditions.

Work in progress

Inclusion of all non-food own-brand suppliers1 in a BSCI or equivalent social standard system by the end of 2014 if the final product is produced in a risk country (based on BSCI definition).

Measure ongoing

Interview

“We want to communicate that sustainabilityis key for long-term viability.”

As import organisation for METRO GROUP, MGB METRO GROUP Buying Hong Kong is responsible for the international purchasing of non-food products for all sales lines. The company cooperates with more than 900 suppliers and producers. In order to ensure the highest levels of quality and safety in the procurement process and to make the supply chain transparent for consumers, MGB sets high standards with its CR strategy. Close communication with producers regarding challenges and opportunities for improvement is essential here. In an interview, Margaret Chan, Executive Manager of Corporate Social Responsibility at MGB Hong Kong, and Michael Ciesielski, Managing Director of MGB Hong Kong, spoke with two business partners: Vicky Wang is the manager of outdoor-furniture manufacturer Yotrio. Robin Qin is the manager of Pipigou in Shanghai, a producer of cashmere clothing.

Interview Partner

MARGARET CHAN

Executive Manager of Corporate Social Responsibility at MGB Hong Kong

MICHAEL CIESIELSKI

Managing Director, MGB Hong Kong

ROBIN QIN

Manager of Pipigou in Shanghai

VICKY WANG

Manager of outdoor-furniture manufacturer Yotrio

Mr Ciesielski, the implementation of social standards, especially in Asian suppliers’ premises, has been gaining increasing public attention. What is the philosophy behind your CR strategy at MGB Hong Kong?

MICHAEL CIESIELSKI The objective of MGB Hong Kong is to have 100 per cent of the goods sourced from factories that are socially compliant. This strategy certainly benefits society but also clearly responds to our customers’ expectations of decent and fair factory conditions in relation to the products they buy. Therefore, having a strong and well-implemented CR strategy is our social obligation. CR is an effective sales tool; we can win customers with our strict social standards for the supply chain. MGB Hong Kong currently works with about 1,700 factories and we know all of them. In this way, we ensure that a high level of transparency is present in our supply chain.

Yet in practice, it is a true challenge to ensure all suppliers and factories adhere to the required social standards. So how does MGB Hong Kong customise its approaches and measures to effectively address the local risks as well as common concerns?

MICHAEL CIESIELSKI It is indeed a challenge. In practice, we carry out a mix of measures. For us, as a member of the Business Social Compliance Initiative (BSCI), a global initiative to promote good working conditions among suppliers, the first step is always to have our suppliers’ production facilities audited. Based on three possible outcomes – non-compliant, improvement needed or good – we take decisions. Severe violations concerning safety issues, child labour, fire prevention or discrimination will result in the immediate termination of cooperation with the supplier. In the case of minor faults which can be corrected, we instruct and help suppliers to address the problem accordingly to fit our standards within a defined time window. The objective is to make suppliers understand that sustainability is a key topic for their long-term viability. This is apparent when we do major business with them.

Of course, we must always keep in mind that circumstances differ from country to country. In Bangladesh, for instance, the main challenge facing us is safety issues. The common high building structure and the lack of safety installations there make it prone to accidents. But overall in Asia, the most common concern is the practice of overtime. MGB Hong Kong fully complies with BSCI and International Labour Organization (ILO) standards, or with local regulations if they are stricter. Our CSR team takes the initiative to communicate with suppliers and discuss possible solutions such as shift changes and productivity improvements to address overtime.

MARGARET CHAN MGB has compiled a package of designed measures to optimise and strengthen social compliance in our supply chain. Our supplier factories are divided into two categories – new and existing. New factories must be examined thoroughly by MGB before being listed, while we audit the existing factories regularly to ensure their CR compliance. In the case of non-compliance, factories are given a maximum of 18 months to improve on the faults to fit our criteria, and are further monitored. We regularly arrange free-of-charge workshops for our active suppliers and business partners, especially in countries like Bangladesh, India and China. They focus on the top causes of non-compliance. Our CSR team invites them to take part in the focused courses to prepare for the required audit processes. It is crucial for them to apply the acquired knowledge in practice, to achieve appropriate improvements.

ROBIN QIN After we failed the BSCI review the first time, we analysed the failure ourselves. MGB staff provided the necessary guidance. They visited our factory and trained us in the correct practices on site. The improvement steps made my workers realise that their own safety and interests are protected by being compliant with the BSCI standards, and this serves as strong motivation for them to take the right steps in practice. Now they have self-protection awareness and more care for the factory.

However, non-compliance may still occur and when that happens, MGB Hong Kong implements more concrete measures to improve and enhance suppliers’ awareness of and compliance with the social standards.

MICHAEL CIESIELSKI Yes, we offer our support wherever we see opportunities. Actually, the suppliers don’t only improve compliance with social standards but also raise their productivity through our joint efforts. To reduce or even eliminate overtime work, for example, we help suppliers with our ILO SCORE project to optimise operational processes and workplace cooperation in order to increase efficiency, including better capacity planning, ordering or booking. This results in less stress for the supplier and more reliability – a win-win situation.

“Since MGB Hong Kong helped us pass the BSCI audit and standardise the factory processes, we have also attracted some other european clients.”

VICKY WANG I think we have benefited a lot from MGB, especially in the area of order management. Due to fluctuating demand, it is not always easy to adjust resources smoothly to meet the demands of different phases. Now we encourage our clients to place busy-season orders or long-term orders during our slack season to secure balanced production around the year. As a result, we maintain a stable workforce without big fluctuations between busy and slack seasons.

How do MGB Hong Kong employees who are involved in the daily assessment of the suppliers’ qualifications receive the necessary sustainability training and working tools to possess the right knowledge and expertise in this regard?

MARGARET CHAN We have regular internal training for our staff, especially our colleagues in the Purchasing and Quality Control departments. They also learn about the BSCI standard and equivalent social standards: occupational health and safety, building, fire and electrical safety, the new BSCI Code of Conduct, etc. Buyers are in direct and close contact with suppliers and factories so they can clearly specify our requirements. For the Quality Control department, this training can enhance their understanding and knowledge of the relevant standards, as they also support checks on fire safety in factories.

Mr Qin, how has your business developed since implementing the social standards? What role does sustainability play in your corporate vision?

ROBIN QIN Since MGB Hong Kong helped us pass the BSCI audit and standardise the factory processes, we have also attracted some other European clients, who were very impressed with our standardised operations when visiting our factory. Actually, it has helped us get more orders from clients. In the future, we will continue to invest in sustainability-related projects because we see sustainability as a key element of our corporate agenda and thus we are willing to make an effort in this area.